2017 Food & BeverageMid-Sized M&A Transactions- Neethika Sajith. - September 2017

Australia H1- 2017

2016 saw robust deal volume in the food & beverage industry in Australia. This was due to steady economic growth and an enduring interest in natural and healthy options from consumers turning to healthy lifestyles and diet choices such as organic, vegan, raw or sugar-free. The food & beverage industry has benefitted from this growth and consumers are spending more on healthy products.During the first half of 2017, there were 21 mid-sized transactions recorded in the food and beverage industry, compared to 23 in the equivalent period in 2016. Total deal value was estimated to be $626.1m. Of those 22, 15 transactions were recorded in Q1, and 7 in Q2.

Recap of 2017 Transactions

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2

23

21

0

0 5 10 15 20 25

2016

2017

Number of Transactions

Year

Mid-Sized M&A Transactions

Transaction Parties by Type

57% of the food & beverage transactions mid market in the first 6 months occurred between two private businesses. The average deal value was $27.9m, thought most transactions were under the $20m mark.

Private Buyer, Private Seller

57%Private Buyer, Public Seller

9%

Public Buyer, Private Seller

29%

Public Buyer, Public Seller

5%

What is the motivation

behind these acquisitions?

Product expansion was the main

rationale given for 36% of the

acquisitions. Through these deals the

companies hope to increase their

product range thereby providing a range

choice of solutions for their clients.

Geographic expansion was the rational

for 32% of the acquisitions. Companies

uses these deals to enter a new market

as some sectors have high barriers to

entry. Given that there was a low

number of international transactions,

geographic expansion was mainly

oriented towards greater overall

Australian coverage.

Economies of scale rounded up the top-

three with 18%. Certain businesses,

even in the tech space are at a mature

phase limiting the opportunities for

organic growth. Therefore, through

acquisitions, businesses can achieve

scale with both revenue and cost

synergies.

3

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Acquire Customers

5%

Economies of Scale18%

Geographic Expansion

32%

Product Diversification

9%

Product Expansion

36%

Acquisition Motivation

Food Manufacturing & Distribution

They were the largest category of food industry acquisitions. Consumers are making healthier food choices. Many companies have diversified their product lines and introduced healthier in their existing goods and drinks. Such companies are both acquiring smaller health driven targets as well as growing existing operations.This is evidenced by the recent acquisition of Power Foods International, an Australia-based manufacturer and brand owner in sports and adult nutrition category. Power Foods was acquired by Freedom Foods Group, a listed Australia-based company, engaged in manufacturing, distribution and marketing of allergen free cereals, nutritional snacks, biscuits, and long-life beverages. This acquisition will enable Freedom to expand its brand and category segment offering into the sports and adult nutrition market in Australia/New Zealand, China and South-East Asia, leveraging existing retail customer and distribution capabilities

Agriculture

Several deals have occurred in the first six months with acquirers main motivation being geographic expansion. International buyers are taking interest in buying farms in Australia. This is evident by the recent purchase of Balboora and Blighty Farms by a US investor brought in by Ace Farming. Ace also bought two farms in Victoria backed by offshore investors. Large cattle stations acquire smaller players to expand geographically and diversify their products. In 2017, Hewitt Cattle Australia made their largest purchase to date by acquiring Hale Pastoral Stations in the Northern Territory for $50m. Australia’s largest beef producer, Gina Rinehart is putting together major expansion plans for her growing cattle empire which already includes 10 cattle stations covering 1.3 per cent of the nation’s land mass. The result will be potential cattle trade to China doubling the size of Australia’s current $1.5 billion live cattle industry.

Consumer’s growing preference to “BFY” (Better-For-You) food products have boosted demand for traditional products such as nuts. Select Harvests, the listed Australia-based almond cultivator, processor and marketer of nuts acquired Jubilee Almonds, an Australian producer of almonds, as well as a 22% stake in another almond processor, LaragonAlmond Huller and Sheller for A$26.5m.

Beverages

There have been three recorded transactions so far in 2017.In March 2017, Australian Whiskey Holdings Limited acquired the Nant Distillery business from Nant Group. The purpose of acquisition was to gain access to wide range of business and expanding opportunities.

Also, this year, Casella Wines added Shaw Family wineries to their portfolio for the purpose of expanding their product base and to increase their footprint throughout South Australia.

Mildura Brewery was acquired by Broo Limited for $1m. This acquisition will enable Broo to diversify their products by starting their own beer production and distribute beer products nationally.

Cross Border Activity

In 2017, the food & beverage industry recorded one international deal worth $200m, compared to 13 recorded in 2016. A listed US-based company, Mead Johnson Company, acquired Australian Bega Cheese Ltd for $200M. This transaction will enable Mead to expand their presence in the global supply network and enter the Australian market.

Several deals have occurred in the first six months with acquirers main motivation being geographic expansion. International buyers are taking interest in buying farms in Australia. This is evident by the recent purchase of Balboora and Blighty Farms by a US investor brought in by Ace Farming. Ace also bought two farms in Victoria backed by offshore investors. Large cattle stations acquire smaller players to expand geographically and diversify their products. In 2017, Hewitt Cattle Australia made their largest purchase to date by acquiring Hale Pastoral Stations in the Northern Territory for $50m. Australia’s largest beef producer, Gina Rinehart is putting together major expansion plans for her growing cattle empire which already includes 10 cattle stations covering 1.3 per cent of the nation’s land mass. The result will be potential cattle trade to China doubling the size of Australia’s current $1.5 billion live cattle industry.

CompletionDate

BuyerCompany

SellerCompany

02-Jan-17 Turi Foods Colonial Farm (Aust) .

31-Jan-17 The Real Petfood Company

Consolidated Manufacturing

Enterprises

31-Jan-17 Forestry Corporation of New South Wales Lyall Estate Plantations

01-Feb-17 Freedom Foods Group Pacific Brands

01-Feb-17 Broo (Kent Grogan) Mildura Brewery

02-Feb-17 Blue Sky Private Equity Quality Food Services (Aust)

13-Feb-17 Hewitt Cattle Australia Hale River Pastoral Company

28-Feb-17 Advent Private Capital Frosty Boy Australia

03-Mar-17 Select Harvests

Laragon Almond Huller &

Sheller

07-Mar-17 Hancock Prospecting Aroona Cattle Station

16-Mar-17 Australian Whisky Holdings

Out & About Marketing and

Media

27-Mar-17 Refresh Group (Henry Heng) Aquazuro Australia

28-Mar-17 Patties Foods Pacific Equity Partners

30-Mar-17 Alterra Dambadjie Springs

31-Mar-17 Casella Wines The Shaw Family

03-Apr-17 Paris creek Beston

12-Apr-17 Mead Johnson & Company Bega Cheese

25-Apr-17 Freedom Foods Group Power Foods International

09-May-17 United Petroleum Pie Face Australia

09-Jun-17 ACE Farming Company The Blighty Farm

13-Jun-17 ACE Farming Company The Balboora Farm

2017 Transactions

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